Cash Back Forever – Why It’s My Favorite Rewards Redemption
Yes, here I am writing about cash back again. I’ve done so plenty before, albeit in relation to specific points currencies. However, I haven’t described overarchingly why cash back is my favorite credit card rewards currency by a wide margin. While “cash back forever” is my number one redemption strategy, I feel it should play a role in everyone’s relationship with credit card rewards – even if one doesn’t decide to redeem for cash. Here are just a few reasons why I prefer cash back redemptions above all else in the credit card rewards hobby.
Control
Of course, we all apply for and (hopefully) receive lucrative credit card welcome offers. The thrill of the approval and the opportunity to earn a huge welcome bonus is undeniable. Many wait for months or years to apply for the exact card and offer they want, and the feeling of accomplishment in obtaining those is natural. However, if we aren’t careful, we can conveniently ignore that we have signed up to be controlled by a bank.
There is no doubt that until any we redeem points or miles associated with a card, we are allowing a bank to control our rewards related-actions or inactions with the account. Banks can decide to devalue an awards currency at any time. They can also limit award availability. Banks run special promos, advertising outsized potential redemption values that are inconveniently unavailable for our specific travel dates. After seeing that potential value, we can easily get wrapped up in that points/miles valuation, allowing the currency to loiter in our accounts in the meantime. After exposure to that first outsized but unrealized redemption, the search for that same value can continue indefinitely.
Taking Back Control
Alternatively, we may have the option to cash out a given points currency at a mundane, yet undeniably solid, rate. Sure, it may be substantially less than that “optimal” redemption value we may have been chasing, but how was that going for us, anyway? Were we ever really going to get that value? Instead, we can get some value now by cashing out. And, make no mistake, points and miles have zero value until we use them.
I have no delusion that we are avoiding all control from the banks by cashing out. But by cashing out, or at least knowing that’s a real option, we are tipping the scales back in our favor.
Growth
When we cash out points, we can deposit those rewards in various instruments where the funds grow. Sure, savings account interest rates are laughable currently, but the growth rates in points and miles accounts is more laughable – zero. After your rewards are cashed out, indecision and procrastination with the currency turn from a liability to an asset. Instead of being susceptible to devaluation, you are slowly accruing interest before using those funds.
You can decide to more actively invest these rewards to potentially obtain higher short- or long-term gains. While the American Express Platinum Card for Schwab makes this very easy, cash rewards from any program can be invested with just a bit more effort.
In addition to growth of those rewards, you can take advantage of additional tax benefits by cashing out your rewards. I discuss that option here.
Freedom
By cashing out, we have the option of using our rewards for anything. I wear my Captain Obvious cape while saying this, but I don’t think we appreciate that enough in our hobby. Unlike travel bookings, cash back redemptions aren’t susceptible to stringent cancellation or expiration policies. Individuals can alternatively use the rewards to lower expenses and further enable financial freedom. And obviously, we can use cash rewards to travel exactly how, when, and where we want. With cash rewards, we become travel free agents. We can truly realized our exact travel goals with no strings attached.
Or maybe you don’t feel like traveling for a bit and instead use rewards for everyday pleasures. Going to that concert that would’ve been too expensive otherwise. Buying that engagement ring that apparently is supposed to cost two paychecks. A little more savings for a down payment for buying your own place. Whatever!
Even More Rewards
As most of us know, points and miles redemptions don’t accrue points or miles on the actual award travel. If you redeem for cash instead, many new opportunities appear. Here are several:
- You can buy your “free” flight or hotel room at cash rates and thereby accumulate the rewards currency with the given program.
- You also open up the opportunity of using the cash for more deeply discounted rates.
- On top of that, you can book through portals for more rewards.
- Of course, with cash rates, you are also eligible for periodic bonus hotel and airline promotions, as well.
- And you can pay with a credit card that earns rewards currencies, then pay off that credit card with the cash back rewards you previously redeemed! Your points are effectively earning more points.
- If you have elite status with the airline/hotel, your status is acknowledged.
All of these options are generally unavailable to anyone directly redeeming their rewards currencies for travel.
Shutdown Mitigation
When we cash out, there is no need to let your rewards sit in your rewards account month after month. You can redeem immediately once the rewards are deposited into your rewards account. Alternatively, those saving for big travel redemptions must slowly accrue the necessary rewards to meet a given redemption requirement. This process can take anywhere from a month (well done), to a few months (good job), or years (yikes).
Many of us in the hobby are very actively spending on credit cards. Banks can grow concerned of our habits and decide to shut down our accounts. I’ve been there. While some banks may play nice (sort of) and allow us a bit of time to redeem, others may not and decide to swipe entire rewards account balances.
Cash back fans may feel a bit of sting, but that’s only from a relatively small amount of rewards during the cycle of shutdown (perhaps). There’s no big pot of rewards to be swiped, since we’ve been actively cashing out all along. Indeed, those of us who cash out are emboldened to be even more aggressive with our points-earning habits, which can make the hobby even more lucrative.
Cash Back Forever, But I Still Collect Other Currencies
While cash back is my favorite rewards redemption, I still accumulate plenty of travel and other rewards currencies. Most often, I’m involved with other currencies during welcome offer minimum spend activities and elevated earning promotions. Also, when I have a specific redemption in mind, I may push harder on a certain currency to top off my account to the appropriate amount.
Cash Back Forever – Conclusion
That’s why cash back is my favorite rewards redemption. Cash back is not a panacea, but it’s the closest thing we have to it in the hobby, from my perspective. Overall, I view travel points and miles currencies as limiters and cash back as the diametrically opposite enabler. Are you a cash back forever or never type? Somewhere in the middle? Or do you prefer a specific points or miles currency over cash? Why?
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No one has ever told me I can’t spend my cash when and where I want to. One of my businesses is a farm which has its own schedule! Cash rules and you are correct that earning a bit more on that cash is possible. I rank UR points highest because no redemption is worth less than a penny, TYP next, then MR a distant third. I have a cache of MR points due to the infrequency of good redemption options.
Dave,
Thanks for sharing your thoughts!
This is the most comprehensive blog post I’ve seen the captures my affinity for cash back and then some. Wonderful write up. As a family of 5 tied to a school schedule, getting outsized value from points is near impossible. I cash out whatever I can whenever possible. The point currencies I collect are few and far between. Cash is king.
Projectx,
Thanks for reading and the kind words!